Absa Bank, linked to Kenyan tycoon Baloobhai Patel, battles KCB over control of Savannah Cement

Oluwatosin Racheal Alabi -

Key Points:

  • Absa wants KCB’s receiver managers removed, citing illegal appointment and obstruction in the administration of Savannah Cement.
  • KCB owes Sh8.89 billion ($62 million) and Absa Sh5.23 billion ($36 million), with a contested administration plan in place.
  • The outcome will set a precedent for handling large-scale corporate insolvencies in Kenya, impacting creditors. 

Absa Bank, associated with the billionaire Baloobhai Patel, is fiercely contesting KCB’s control over the financially troubled Savannah Cement. The cement manufacturer defaulted on loans exceeding Sh14 billion ($98 million), leading to its current state of administration.

Absa seeks removal of KCB’s receiver managers

Absa Bank has petitioned the court to remove the two receiver managers appointed by KCB, arguing that their interference hinders the smooth administration of Savannah Cement. Absa has appointed Peter Kahi as the administrator, while KCB selected PVR Rao and Swaroop Rao.

In its legal filings, Absa is pushing for temporary orders to prevent KCB’s receiver managers from obstructing Mr. Kahi’s efforts to manage and recover the company’s assets. The bank insists that the receivership was initiated illegally, contrary to the Insolvency Act, since the firm was already under administration.

Savannah’s financial records reveal that KCB is owed Sh8.89 billion ($62 million) and Absa Sh5.23 billion ($36 million), with a portion of Absa’s loan in U.S. dollars. Absa’s lawyer, Peter Wawire, claims KCB’s actions are intended to derail the administration process and prevent the implementation of a recovery plan approved by creditors in April 2024.

The stakes are Savannah Cement’s liabilities total Sh18 billion ($126 million), with debts to KCB and Absa comprising the majority. Mr. Kahi’s report indicates that a turnaround of the company would be protracted and costly, potentially taking over a decade without guaranteed success, posing significant risks to creditors.

The legal battle has seen numerous allegations, including the administrator being denied access to company premises, damage to assets due to neglect, and physical confrontations between staff and security personnel. Absa contends that KCB’s receiver managers were appointed illegally and that Mr. Kahi has been carrying out his duties lawfully with court permission.

As this legal conflict unfolds, the outcome will not only determine the fate of Savannah Cement but also set a precedent for handling large-scale corporate insolvencies in Kenya. The intense rivalry between Absa and KCB underscores the high stakes involved in managing and recovering corporate debts in the region.

Formerly Barclays Bank Kenya Limited, Absa Bank Kenya plays a key role in the Kenyan banking sector, offering retail, corporate, treasury, and card services. It also fosters local enterprises and SMEs through strategic partnerships.

Baloobhai Patel, a prominent Kenyan businessman, holds a 1.03-percent stake in Absa Kenya with 55.86 million shares. His strategic investments in blue-chip stocks have solidified his position as one of Kenya’s wealthiest individuals.